Monday Watch

Weekend Headlines
Bloomberg:

• Papandreou Rescue Request Angers Greeks as EU, IMF Ready Cuts. Greek Prime Minister George Papandreou’s handling of the country’s fiscal crisis has angered voters, weakening his government as the European Union and International Monetary Fund prepare to impose budget cuts. Polls this weekend showed two thirds of voters are dissatisfied with his crisis management as they fret about the austerity measures that the IMF and EU will demand in return for 45 billion euros ($60 billion) of rescue funds. Sixty-five percent of those polled by researcher Alco for the Proto Thema newspaper said the government should reject any measures that lead to more reductions in wages and pensions. “It’s going to get harder and harder to keep people on side,” said Colin Ellis, European economist at Daiwa Capital Europe Ltd. in London. “On the one hand, he’s got the markets baying for blood and the EU and IMF are going to ask for even tougher cuts. On the other hand, he’s facing more and more resistance to reforms at home.”
  
• Euro Drops on Speculation Greek Bailout Won't Resolve Crisis. The euro fell against the dollar on concern Greece’s request for a $60 billion bailout led by the European Union will fail to ease investor concerns about the nation’s ability to end its fiscal crisis. The 16-nation currency slid against 14 of its 16 most- active counterparts as investors demand Greece pay almost triple what they charge Germany for its 10-year bonds. Greek Finance Minister George Papaconstantinou told investors they will “lose their shirts” if they bet the cash-strapped nation will default, as his government moved toward securing emergency aid before debt payments come due in mid-May. “A stop-gap deal alone won’t remove the risk of a default by Greece,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co., an investment advisory company. “Money managers are still inclined to shift funds away from the euro.” Futures traders increased their bets that the euro will decline against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 71,424 on April 20, compared with net shorts of 55,464 a week earlier.
• Venezuela May Nationalize Gold Mining, Says Chavez. Venezuelan President Hugo Chavez threatened to nationalize gold mining concessions in the South American country. Venezuela may end concessions because of “capitalist mafias” comprising national and multinational companies that destroy the environment and exploit workers, Chavez said on state television today. “If we are going to exploit gold, we would have to nationalize all that, recover and end the concessions,” Chavez said.
• Crude Oil Rises a Fifth Day on Signs Global Fuel Demand to Recover.
  
• Giannoulias to Move 'Forward' in Senate Race After Bank Seizure. U.S. Senate candidate Alexi Giannoulias, the Democratic candidate seeking the seat once held by President Barack Obama in Illinois, vowed to press on with his campaign after regulators seized the bank his family owns. The bank, whose profits helped finance and provide credibility to Giannoulias’s successful 2006 state treasurer bid, has shaped a contest for a seat Democrats have unexpectedly found themselves defending and one that will help determine whether Obama’s party keeps its Senate majority. Republican nominee Mark Kirk, 50, a five-term congressman from Chicago’s northern suburbs, has repeatedly suggested Giannoulias, 34, exercised bad judgment while working at the bank from 2002 through 2006 as a senior loan officer and vice president. “While years of risky lending schemes, hot money investments and loans to organized crime led to today’s failure, it’s a sad day for Broadway Bank employees who may lose their jobs due to Mr. Giannoulias’ reckless business practices,” Kirk’s campaign said in a statement. In March, a Chicago restaurateur who gave more than $100,000 to Giannoulias -- and $4,600 to Obama -- was charged with defrauding banks by writing $1.8 million in bad checks. The bank, owned by three brothers and their mother, was founded in 1979 by Alexis Giannoulias, the candidate’s late father. Obama’s 2004 U.S. Senate campaign committee banked there.
• AIG(AIG) May Be on the Hook in Lawsuits Against Goldman Sachs(GS) Board. American International Group Inc. may be required to pay to defend lawsuits against Goldman Sachs Group Inc.’s top executives, including Chairman and Chief Executive Officer Lloyd Blankfein, under directors and officers insurance policies held by the company. AIG, which was rescued from collapse by the U.S. government, sold so-called Side A directors and officers’ coverage to New York-based Goldman Sachs, according to a person with knowledge of the policy.
• Top 100 Political Donors from 1989-2010(Table). Following is a comparison of the top political donors from the 1989-2010 election cycle to political party as compiled by the Center for Responsive Politics. The last column is the difference in a firm’s average percentage of donations to Democrats from the 1989 to 2010 cycles compared to its 2010 cycle only donation. For example, Goldman Sachs has increased its percentage of donations from 64 percent to democrats to 75 percent in the latest cycle only.
• Countrywide Investors Said to Settle Lawsuit for $600 Million. Countrywide Financial Corp. investors, led by a group of New York retirement funds, have agreed to settle a class-action lawsuit for more than $600 million, a person familiar with the case said.
• Dollar Strength Grows as Carry Trade Profits Evaporate. Foreign-exchange profits from carry trades are disappearing as differences in central bank interest rates fail to increase fast enough to compensate for swings in currency rates. Royal Bank of Scotland Plc’s index tracking the strategy of tapping cash where borrowing costs are low and investing where rates are higher, rose 0.57 percent in the first quarter, the smallest amount in a year, and down from 9.8 percent in all of 2009. Morgan Stanley strategists said in an April 15 research report that the only “functionally attractive” currency to target in carry trades is Australia’s dollar. Falling demand for carry trades may help the dollar -- a favorite for funding the trades because of record low U.S. rates -- extend a rally that drove it 12 percent higher versus the euro the past six months. Gains of almost 30 percent in Brazil’s real, New Zealand’s dollar and South Africa’s rand the past 12 months suggest they already reflect the prospect of higher rates as central bankers begin to shift monetary policy. “There is no easy money left in the carry trade,” said Henrik Pedersen, the London-based chief investment officer at Pareto Investment Management Ltd., which oversees $45 billion in currency assets.
• I'll Tell You When Chinese Bubble Is About to Burst: Andy Xie. “My maid just asked for leave,” a friend in Beijing told me recently. “She’s rushing home to buy property. I suggested she borrow 70 percent, so she could cap the loss.” It wasn’t the first time I had heard such a story in China. Some friends in Shanghai have told me similar ones. It seems all the housemaids are rushing into the market at the same time. There are benefits to housekeeping for fund managers. China’s housemaids may be Asia’s answer to the shoeshine boy whose stock tips prompted Joseph Kennedy to sell his shares before the Wall Street Crash of 1929.
• Rogoff Says Greece Probably Won't Be Last IMF Bailout in Europe. Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff. “It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.” “The stakes are very high for Europe as it wants to avoid contagion,” said Rogoff, who in 2008 predicted the failure of some large U.S. banks prior to the collapse of Lehman Brothers Holdings Inc. Any Spanish bailout would dwarf that for Greece as its economy is four times bigger. Although Spanish debt as a share of GDP is 53.2 percent compared with Greece’s 115.1 percent, it’s still worth 560 billion euros, more than double Greece’s burden. Ireland has debt of 105 billion euros, or 64 percent of GDP, and Portugal has 126 billion euros, equivalent to 76.8 percent of GDP. Rogoff said the “basic game plan” of European policy makers is to hope their economic recoveries strengthen enough to enable governments to cut their debt. The IMF last week predicted the euro-area economy will expand 1 percent this year compared with 3.1 percent growth in the U.S.
• IMF Official Says Greece's Crisis Is Lesson for Japan. Greece’s financial woes serve as a lesson to Japan, which must devise a “credible” fiscal plan to curtail the world’s largest public debt, an International Monetary Fund official said. “I don’t think the threat of a spillover from Greece will impact Japan for the moment,” Naoyuki Shinohara, deputy managing director at the International Monetary Fund, said in an interview in Washington today. “Yet, it’s important for the government to show a credible fiscal framework in the medium term. Greece shouldn’t be regarded as a fire on the other side of the river.”
• 'Urgent Action' Needed to Control Capital Flows, StanChart Says. Emerging markets need to take “urgent action” on the surge of liquidity and capital flowing into their economies because they could spur inflation and trigger another crisis, according to Standard Chartered Plc. The capital flows range from bank lending and portfolio investments to “hot money” and corporate bond issuance, economists Gerard Lyons and Natalia Lechmanova wrote in a report published today. Greater currency flexibility, tighter monetary policy and some capital controls are among measures that can be taken to help manage the inflows, they said. “Just as excess liquidity contributed to problems in the Western developed economies ahead of the financial crisis, excess liquidity has the potential to trigger fresh economic and financial problems across the emerging world,” they wrote. “Many countries do not have the capacity to absorb such inflows and thus the money often ends up in equity or real estate, adding to inflationary pressures.”

Wall Street Journal:

• Deal Near on Derivatives. Berkshire(BRK/A) Presses Lawmakers to Roll Back Proposed Curbs, Avoiding Potential Hit. Democrats took a step toward their goal of overhauling financial regulation, reaching a tentative deal to set restrictions on trading in exotic financial instruments known as derivatives. Among the considerations still in the balance: A big provision being sought by Warren Buffett in recent weeks. A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett's Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say. The fate of Berkshire's effort to influence the legislation remains uncertain. Senate officials said Sunday night that most of the details of the agreement haven't yet been finalized. The provision, sought by Berkshire and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire put aside large sums to cover potential losses. The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital. Mr. Buffett's push is especially notable because he has warned of the potential dangers of derivatives, famously branding them "financial weapons of mass destruction." A fracas over the measure could hurt Democrats. The Obama administration wants to avoid the home-state horse-trading that almost sank its health-care overhaul. Berkshire is based in Omaha, Neb., and has longstanding ties to the state's Sen. Nelson. Berkshire officials have long supported Mr. Nelson. Berkshire employees, including Mr. Buffett, have given Sen. Nelson $75,550 over his political career, more than any other company, according to the Center for Responsive Politics, a nonpartisan group that tracks such data.
• Goldman's(GS) Tourre Meets With Senate Investigators. Over the weekend, signs of stress emerged in the relationship between Mr. Tourre and Goldman. On Saturday, Goldman released batches of emails by Mr. Tourre to girlfriends that revealed doubts about some mortgage securities issued by the company and an occasionally dismissive attitude toward the investors buying them. Goldman also released translations of portions of emails that originally were in French, including some messages with details about Mr. Tourre's personal life. The scope of the released documents led to widespread speculation that Goldman was seeking to make more-senior executives who also are caught in an uncomfortable political and public-relations spotlight look better by comparison to the 31-year-old trader. Mr. Tourre used colorful language in his emails. In one message, he wrote that he sold a product to "widows and orphans," comparing an investment he helped create to "Frankenstein turning against his own inventor."
• Investors Lost, Goldman(GS) Won on WaMu Deal. Washington Mutual Inc. and its Long Beach Mortgage Co. subprime-lending unit rang up one of the worst failures in U.S. history. Left in the wake were billions of dollars of soured loans and questionable lending practices. But when times were better, the two companies had a powerful partner on Wall Street: Goldman Sachs Group Inc. Recently released emails and other documents, including securities filings, show how Goldman, considered one of Wall Street's most elite banks, built its mortgage business by closely working with lenders such as Washington Mutual and Long Beach, two firms that "polluted the financial system."
• FTC Investigates Oil Firms Over Hiring, Wages. The Federal Trade Commission is investigating whether the world's biggest oil companies colluded to suppress managerial, professional and technical employees' wages in ways that violated U.S. antitrust laws, according to people familiar with the matter. The previously undisclosed probe has been open for several years and involves as many as a dozen oil companies, including Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC and Chevron Corp, these people said. The probe remains active, they added, but the five FTC commissioners have yet to vote on the matter, and it is possible a suit will never be brought.
• Complex Structured Credit Returns to Market. Some forms of complex structured products tied to credit derivatives have returned, after a two-year lull imposed by the crisis. JP Morgan(JPM) and UBS (UBS) are marketing so-called collateralised synthetic obligations, which use credit derivatives to reference corporate debt. Unlike the collateralised debt obligations worst hit during the crisis, which were tied to derivatives on mortgage-backed securities, the new CSOs are bets on the direction of credit spreads.
• Fannie Offers Spur to Avoid Foreclosure. Fannie Mae will make it easier for some struggling homeowners to buy houses in the future if they avoid foreclosure in the present. Under rules released this month that will take effect in July, some troubled borrowers who give up their homes by voluntarily transferring ownership through a "deed in lieu of foreclosure" or by completing a short sale, where a home is sold for less than the amount owed, will be eligible in two years to apply for a new mortgage backed by Fannie.
• China Considers U.S.-Style Property Tax. China is considering introducing new or higher taxes on real estate, possibly even a U.S.-style property tax, which would mark a significant escalation of its struggle to cool down a booming property market now widely being described as a bubble. How authorities handle any kind of property tax—the prospect of which is fiercely opposed by some property developers—will have significant implications for China's economy, and will ripple through global markets. The construction boom is the main driver of the current recovery in China, and is one of the few parts of the world economy growing strongly right now.
• Standoff Over Ship Escalates in Koreas. South Korea's top military official said Sunday that a torpedo likely exploded under the South Korean patrol boat that sank a month ago near the maritime border with North Korea, bringing Seoul closer to declaring it was attacked by the North and hastening a delicate decision about what to do next. The finding puts South Korea and its ally the U.S. in a bind in confronting the nuclear-armed totalitarian state. Seoul faces several constraints in penalizing Pyongyang, starting with the prospect that a military response could escalate into a war that very few here want. The response could include seeking economic sanctions through the United Nations, a senior official in Seoul said, but the timing may be shaped by an approaching South Korean election and the process of rallying world support for penalties.
• Stifel Financial Expected to Acquire Thomas Weisel Partners. Stifel Financial Corp. is expected to announce the acquisition of Thomas Weisel Partners Group Inc. in a roughly $300 million all-stock deal, creating an unlikely marriage between a St. Louis brokerage and San Francisco high-tech investment bank.

Bloomberg Businessweek:

• Stocks in U.S. Cheapest Since 1990 as Analysts Boost Estimates. Earnings estimates for Standard & Poor’s 500 Index companies from Apple Inc. to Intel Corp. and CSX Corp. climbed 9.1 percent on average in April, twice the gain in their prices and the largest monthly increase since at least 2006, data compiled by Bloomberg show. The benchmark gauge for American equities is trading at 14.2 times forecasts for its companies’ profits, lower than any time since 1990, except for the six months after Lehman Brothers Holdings Inc. collapsed. Income is beating analysts’ estimates by 22 percent in the first quarter, making investors even more bullish that the rally will continue after the index climbed 80 percent since March 2009. While bears say the economy’s recovery is too weak for earnings to keep up the momentum, Fisher Investments and BlackRock Inc. are snapping up companies whose results are most tied to economic expansion.“The stock market is incredibly inexpensive,” said Kevin Rendino, who manages $11 billion in Plainsboro, New Jersey, for BlackRock, the world’s largest asset manager. “I don’t know how the bears can argue against how well corporations are doing.”

CNBC:

• Climate Bill Delayed Over Immigration Snag.
  

NY Times:

• Health Care Cost Increase Is Projected for New Law. A government analysis of the new health care law says it will not slow the overall growth of health spending because the expansion of insurance and services to 34 million people will offset cost reductions in Medicare and other programs. The study, by the chief Medicare actuary, Richard S. Foster, provides a detailed, rigorous analysis of the law. In signing the measure last month, President Obama said it would “bring down health care costs for families and businesses and governments.” But Mr. Foster said, “Overall national health expenditures under the health reform act would increase by a total of $311 billion,” or nine-tenths of 1 percent, compared with the amounts that would otherwise be spent from 2010 to 2019. In his report, sent to Congress Thursday night, Mr. Foster said that some provisions of the law, including cutbacks in Medicare payments to health care providers and a tax on high-cost employer-sponsored coverage, would slow the growth of health costs. But he said the savings “would be more than offset through 2019 by the higher health expenditures resulting from the coverage expansions.” The report says that 34 million uninsured people will gain coverage under the law, but that 23 million people, including 5 million illegal immigrants, will still be uninsured in 2019. Republicans said the report vindicated their concerns about the law, which was approved without a single Republican vote.
• Chinese Military Seeks to Extend Its Naval Power. The Chinese military is seeking to project naval power well beyond the Chinese coast, from the oil ports of the Middle East to the shipping lanes of the Pacific, where the United States Navy has long reigned as the dominant force, military officials and analysts say. China calls the new strategy “far sea defense,” and the speed with which it is building long-range capabilities has surprised foreign military officials. The strategy is a sharp break from the traditional, narrower doctrine of preparing for war over the self-governing island of Taiwan or defending the Chinese coast. Now, Chinese admirals say they want warships to escort commercial vessels that are crucial to the country’s economy, from as far as the Persian Gulf to the Strait of Malacca, in Southeast Asia, and to help secure Chinese interests in the resource-rich South and East China Seas. In late March, two Chinese warships docked in Abu Dhabi, the first time the modern Chinese Navy made a port visit in the Middle East. The overall plan reflects China’s growing sense of self-confidence and increasing willingness to assert its interests abroad. China’s naval ambitions are being felt, too, in recent muscle flexing with the United States: in March, Chinese officials told senior American officials privately that China would brook no foreign interference in its territorial issues in the South China Sea, said a senior American official involved in China policy.
• Hertz(HTZ) to Buy Dollar Thrifty(DTG) for $1.2 Billion.
  

NY Post:

• Analyst: Paulson's Role Hidden in Goldman CDO. A former analyst who assigned a rating to the complex mortgage securities at the center of the Securities and Exchange Commission's fraud case against Goldman Sachs said yesterday he didn't know about hedge- fund titan John Paulson's involvement in engineering the deal. "It just changes the whole dynamic of the structure," Eric Kolchinsky, told a Senate subcommittee about not knowing that Paulson helped put together the collateralized debt obligation in question. It was "something that I would have wanted to know." The testimony by Kolchinsky, a former analyst at Moody's Investors Service, adds a new twist to the SEC's case against the gold-plated bank and a vice president, Fabrice Tourre, both of whom are accused of misleading investors by withholding information that Paulson had a role in selecting at least some of the collateral used in the controversial CDO. Paulson rang up a $1 billion in profit by shorting the CDO offering, while the SEC claims that investors, including ACA Management, were duped into losses because they were unaware of Paulson's role.
• 12 Smart Ways to Fix Wall St. Regulation.
  

CNNMoney:

• 20 Top-Performing Stocks.

Business Insider:

• Grantham: This Crazy Market Could Go Roaring Right Back to Its Old Highs. The economy will recover more slowly than people want, and that will prompt "Helicopter Ben" Bernanke to keep rates too low for too long. This, in turn, will make stocks go to the moon. And that would be good news for stock investors. For a while. Except that stocks are already overvalued, so when the effect of the Bernanke crack-hit wears off, there will be nothing left to support them. And down they will come.
• We Need a Government That Isn't Funded by Wall Street by Robert Reich.
  

Washington Post:

• How Hedge Fund Manager Steve Cohen Averaged 30% Returns for 18 Years.
• Goldman(GS) Executives' E-Mails Show Glee at Housing's Drop. The documents show that the firm's executives were celebrating earlier investments calculated to benefit if housing prices fell, a Senate investigative committee found. In an e-mail sent in the fall of 2007, for example, Goldman executive Donald Mullen predicted a windfall because credit-rating companies had downgraded mortgage-related investments, which caused losses for investors. "Sounds like we will make some serious money," Mullen wrote. Lawmakers said the internal e-mails, released Saturday by the Senate Permanent Subcommittee on Investigations, contradict Goldman's assertions that the bank was not trying to make big profits off the decline of the housing market in 2007 and was merely seeking to protect itself if prices collapsed.

The American:

• Yes, It's a Bailout Bill. Markets participants will understand that the Senate financial regulation bill allows for bailouts, and this will give rise to riskier behavior that in turn makes future bailouts more likely. The debate over financial regulation is now focused squarely on the ability of the government to take over a failing financial institution such as a bank holding company or hedge fund—so-called non-bank resolution authority. This is the linchpin of reform because allowing the government to intervene in a crisis will affect investors’ risk-taking behavior from the start—for better or worse. A resolution regime that provides certainty against bailouts will reduce the riskiness of markets and thus help avoid a future crisis, while a reform that enshrines the possibility of bailouts will foster risky behavior and unwittingly make future bailouts more likely. The key choice is thus whether financial regulatory reform gives the government discretion to bail out creditors or instead ensures that these counterparties take losses.

Seeking Alpha:

• Jail Time for Wall Street's Derivatives Writers? In short, if the FTC or the U.S. Justice Department is inthe mood to strictly enforce the law, the proverbial “book” could be thrown at some of the derivatives players, including Goldman Sachs. So far, only the SEC has acted. However, other government agencies like the FTC have fewer conflicts of interest with the financial industry, and may well be more effective regulators of this type of activity. Beyond that, there is no doubt in my mind that private class actions will be coming soon to a courtroom near you. There is potential jail time and plenty of civil liability ahead for Goldman Sachs executives, John Paulson and, perhaps, many others. The Federal Credit Reporting Act is merely one more platform on which prosecutors, both public and private, might base their case. The fallout from the Credit Crisis may just be starting.

Forbes:

• Virtualization: Spending Money to Save Money.

San Francisco Chronicle:

• Bay Area Dems Request $2.3 Billion in Earmarks. Thirteen Bay Area members of Congress have requested $2.3 billion for projects in next year's federal budget, ranging from earthquake retrofits for the Golden Gate Bridge to a bike trail in Bodega Bay. The projects, known as earmarks, would primarily benefit their own constituents. The members' requests are among hundreds of such projects submitted for consideration by California members of Congress, and for the first time, House members are required to post their requests on the Appropriations Committee Web site, offering an easy look into their local priorities. Earmarks have become a flash point in the debate over balancing the federal budget. Fiscal conservatives decry the spending as wasteful, while others say earmarks are necessary to direct federal spending to worthwhile projects. Rep. Barbara Lee, D-Oakland asked for $587 million, more than any other Bay Area member, including $41 million toward renovating the Lawrence Berkeley National Labratory's World War II-era buildings and $2.5 million toward a new ferry service between Berkeley and San Francisco. An analysis by the California News Service shows that despite pressure to curb earmarks, California Democrats requested roughly $7.5 billion for the coming year, an average of $220 million per member. Some are requested by more than one member, while others address nationwide - not local - needs. Though not all projects will be approved, the total is 150 percent larger than what California received last year. The single most expensive Bay Area request is from Rep. Lynn Woolsey, D-Petaluma and Mike Thompson, D-St. Helena: $80 million for salmon restoration in California. Other requests are far smaller in scope. Rep. Zoe Lofgren, D-San Jose, asked for $250,000 to provide mental health services at homeless shelters in San Jose. Thompson requested $100,000 to study flood prevention in Humboldt County's Redwood Creek. House Republicans pledged in March to forgo earmarks to highlight their commitment to reducing federal spending. "The idea that the federal government is an open bank account for local government or state governments or local schools or associations or private groups or businesses is just wrong," said Rep. Dan Lungren, R-Gold River (Sacramento County.) "We don't have an unlimited bank account."

NYDailyNews.com:

• Chuck Schumer Fund-Raiser John Paulson is Key Figure in Goldman Sachs(GS) Fraud Case, Records Show. One of New York Sen. Chuck Schumer's top recent fund-raisers is a key figure in the Goldman Sachs fraud case, a review of federal campaign records reveals. John Paulson, leader of the $33 billion hedge-fund firm Paulson & Co., helped Democrat Schumer collect nearly $100,000 in the first three months of this year. Schumer is running for a third term in November. Paulson's role in the alleged shenanigans has not prompted Schumer to refund the cash from his stockpile of nearly $22 million. But it has rung alarm bells. Schumer, the third-most-powerful Democrat in the Senate and a member of the Finance and Banking committees, is a key player in financial reforms under debate in Congress. Schumer's camp made it clear that it had no qualms about passing the hat among big-bucks donors who are likely to feel the impact of reforms. The money - a total of $95,300 from 21 Paulson workers and seven of their spouses - was given in advance for an April 5 fund-raiser at the Friars Club in Manhattan. A spokesman for the firm would only say that John Paulson held the event because he "supports candidates based on keeping the United States the financial and economic capital of the world." The senator is hardly the only politician to feel Paulson's love. Andrew Cuomo, the state attorney general and presumed candidate for governor, also has raked in nearly $100,000 from him since 2008.
  

Rasmussen Reports:

• 80% Say Religious Faith is Important to Their Daily Lives. Eight-out-of-10 Americans (80%) say that their religious faith is at least somewhat important in their daily lives, according to a new Rasmussen Reports national telephone survey. Just 18% feel their religious faith is not very or not at all important to their lives.

Real Clear Politics:

• The Wall Street Democrats. When President Barack Obama's vast new regulatory state is completed, Wall Street firms ought to have a competition over the naming rights. Will it be the CitiDeal? Or the Goldman Society? Or the UBS/J.P. Morgan Joint Initiative for the Establishment of a Social Democracy? The Democratic majority was bought and paid for by Wall Street and corporate money. Democrats beat Republicans in the Wall Street money chase in 2006, and kept on going. In the 2008 election cycle, Democrats garnered 73 percent of the political donations of Goldman Sachs, as well as the majority of donations from other financial giants such as UBS and Citigroup. They soaked up most of the hedge-fund money, and won the battle for donations from industries as varied as health care, defense, and law. At the end of last year, the Center for Responsive Politics wrote of hedge funds and private equity firms, "This election cycle is proving to be the most left-leaning for the industry." And it wasn't just finance. "Democrats have an enormous lead in almost every business sector they denounce," NR's Kevin D. Williamson noted in January. This is the threat of corporatism - that it's pro-business and anti-market. Unfettered capitalism represents a threat to existing firms as much as a boon to them because the unforgiving discipline of the market always looms.

Reuters:

• China Commerce Minister Cautious on Export Growth. China's exports are recovering but with demand still sluggish in Western nations, growth is unlikely to reach pre-financial crisis levels this year, Commerce Minister Chen Deming said on a visit to a top trade fair. Chen said there were fewer U.S. and European buyers at the Canton Fair than in the past, reflecting the slow revival of consumption in countries hit hard by the credit crunch. Many of the buyers were also just restocking and making short term orders, against a backdrop of wariness about the recovery of markets and trade conditions, according to a report of Chen's comments on the Commerce Ministry website. There are lingering fears of protectionism in both Beijing and Washington, which have been exacerbated by a flurry of recent moves in long-standing trade disputes between the two. "Chinese exports are expected to achieve better results than last year, but the growth pace won't be very fast," the official Xinhua agency quoted Chen saying at the fair.
• The People's Bank of China is "highly" likely to raise interest rates within a limited range, citing a central bank researcher Li De.
• Hispanics Urge Obama to Reform Immigration Laws.
• Chavez Gives Venezuelan Troops 40% Pay Rise. Venezuela's President Hugo Chavez on Sunday ordered a 40 percent pay rise for the armed forces, an increase that may help consolidate his support with troops by countering inflation ahead of legislative elections. Chavez said the pay rise would bring a cadet's salary to 2,500 bolivars ($543). The former soldier has ramped up military spending during his 11 years in power, buying billions of dollars of mainly Russian and Chinese made arms to replace aging equipment.

Financial Times:

• Brutal Choices Over British Deficit. The next government will have to cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the axe to programmes such as school building and road maintenance – or make a set of equally politically perilous choices, according to an analysis by the Financial Times. Packages of measures such as these are already under consideration in the Treasury and will be needed if further big tax rises are to be avoided as the next chancellor seeks, at a minimum, to halve the deficit by 2014 – a goal to which all the main parties are signed up. The spending choices are so difficult that senior officials believe that an incoming chancellor may be forced to resort to additional tax increases. At the very least, Treasury officials believe the next government must bring down the cost of social security benefits to prevent drastic cuts in the areas of government activity that the parties have said they will not protect. “If you take 25 per cent out of defence, you would not have much of an army left,” one official said. FT costings of a range of the choices that the next chancellor will face show that almost the whole population would be hit as the new government makes £30bn-£40bn of cuts in real terms to halve the deficit. An online simulator, developed by the FT using government figures, suggests a saving of that scale would require all of the following: a 5 per cent cut in public sector pay; freezing benefits for a year; means-testing child benefit; abolishing winter fuel payments and free television licences; reducing prison numbers by a quarter; axing the two planned aircraft carriers; withdrawing free bus passes for pensioners; delaying Crossrail for three years; halving roads maintenance; stopping school building; halving the spend on teaching assistants and NHS dentistry; and cutting funding to Scotland and Wales by 10 per cent. The public is braced for this looming era of fiscal austerity, but the case for spending cuts is yet to win over the public sector workers likely to be among the worst affected, a FT poll suggests.
• Greece is Europe's Very Own Subprime Crisis by Wolfgang Munchau. This is going to be the most important week in the 11-year history of Europe’s monetary union. By the end of it we will know whether the Greek fiscal crisis can be contained or whether it will metastasise to other parts of the eurozone. By then, the International Monetary Fund and the Greek government should have reached a deal. There are three things to watch out for.
• Charles River(CRL) to Buy Chinese Drug Firm. Pharmaceutical-research company Charles River Laboratories International Inc. is expected to announce the acquisition of one of China's largest drug-research contractors, WuXi AppTec Co., for $1.6 billion, a person familiar with the matter said Sunday.
• Cash-Rich Tech Companies Avoid M&A Path. A handful of the largest US technology companies have increased their cash mountains by 40 per cent over the past year, taking their reserves to nearly a quarter of a trillion dollars, according to figures released in recent days. Conservative balance sheet management in the face of economic uncertainty and the failure of an anticipated wave of mergers and acquisitions to materialise have resulted in a massive build-up of liquidity among a small group of leading companies. The 10 largest tech companies added more than $65bn to their reserves since the depths of the slump a year ago, according to a Financial Times analysis. Rising competition in some big tech markets, such as mobile computing, has also led the largest companies to hoard reserves, led by Apple, now the richest tech group with nearly $42bn in cash and investments. The cash build-up has led some groups to promise a return to larger share buy-backs.

Telegraph:

• Germany Refuses to Help Greece Unless it Agrees to Tougher Terms. Germany's finance minister Wolfgang Schauble has raised fresh obstacles to the €40bn (£35bn) aid package for Greece, warning that Berlin will not transfer funds until Athens agrees to tougher terms. Mr Schauble said no decision had yet been taken by Berlin or the European Union and that the outcome may yet be "negative". "It depends entirely on whether Greece goes through with the strict austerity in coming years," he told Bild Zeitung. George Papaconstantinou, Greece's finance minister, insisted in Washington that the Germans were "completely on board" and that other EU states and the International Monetary Fund would provide a bridging loan if necessary. He said funds "will lose their shirts" if they have taken short bets on Greek debt. "I want to categorically state that any restructuring is off the table."

TechCrunch Europe:

• New EU Rules Could Kill Off European VC and Hurt Startups - Let's Stop Them. The European Union’s proposed Alternative Investment Fund Managers Directive sounds relatively innocuous. But its impact could have far reaching consequences for Europe’s emerging startup tech scene, imposing higher costs, red tape and put off most institutional investors from investing in VC funds. The Directive could – to be blunt – completely shaft VC, and thus venture backed startups in Europe. Here’s how, and here’s what you can do about it.

Der Spiegel:

• Greece should consider withdrawing from Europe's common currency union, citing Hans-Peter Friedrich, a senior lawmaker in German Chancellor Angela Merkel's ruling coalition. "Greece has not just a liquidity problem, but also a fundamental growth and structural problem" and should "seriously consider leaving the euro area," Friedrich, head of the Christian Social Union in the German parliament, was cited as saying.

Focus:

• German Finance Minister Wolfgang Schaeuble said Greece will lose financial aid any time it fails to meet European Union demands on fiscal discipline, citing an interview with the official. Finance ministers of countries using the euro have imposed a tough austerity program on Greece, Schaeuble said. "Naturally, aid won't flow if there are violations," he said.

China Securities Journal:

• China should change its monetary policy because the nation's "economic imbalance" is worsening, former adviser of China's central bank Yu Yongding said.
  

Economic Times:

• Hong Kong home transactions fell 40% at the weekend from a week earlier after the government introduced measures to cool the city's property market. Some property sellers cut asking prices or forfeited deposits. Sales of new homes fell 61% to 25 over the past two days, the report said. Measures introduced by the government have increased expectations that the property market is nearing its peak, citing academics. Hong Kong's Financial Secretary said April 21 the government is "highly concerned' about gains in home prices and will accelerate a series of auctions to make more property available. Tsang said the city may also raise the stamp duty and warned that 20-year-low mortgage rates won't continue forever.

Weekend Recommendations
Barron's:

• Made positive comments on (AAPL), (QCOM), (GOOG), (FISV), (EMC), (MICC), (TEVA), (GES) and (CSCO).
• Made negative comments on (RMBS).

Citigroup:

• Reiterated Buy on (LH), raised target to $90.
• Reiterated Buy on (LNCR), raised target to $56.
• Reiterated Buy on (CAT), raised target to $61.

Night Trading

• Asian indices are +.50% to +1.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 96.0 -3.0 basis points.
• S&P 500 futures +.04%.
• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BLK)/2.44
• (WHR)/1.24
• (HUM)/1.14
• (CAT)/.39
• (MAS)/.00
• (TXN)/.51
• (BSX)/.08
• (VECO)/.47
• (WMS)/.49
• (SLG)/1.04

Economic Releases

• None of note

Upcoming Splits

• (HEI) 5-for-4
  

Other Potential Market Movers

• The Dallas Fed Manufacturing Activity report, (RIMM) Capital Markets Day and the $11 Billion 5-Year TIPS auction could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.